Advice for commercial landlords and tenants during the ongoing COVID-19 pandemic

Blur shopping mall

The COVID-19 pandemic has impacted almost every industry in the UK, with many businesses experiencing a severe strain on their cashflow as a result. While commercial tenants may be struggling to pay rent in full and on a regular basis, their landlord could also be under pressure if they rely on these payments to maintain their own cashflow. Both parties to a commercial lease contract should understand how their liabilities and obligations have been affected by COVID-19 and ideally work together towards a solution.

What can a landlord do if a commercial tenant is unable to pay rent?

Landlords can normally use various measures to recover rent from a non-paying tenant, however, the government has enacted legislation to protect commercial tenants from both legal action and eviction until at least 30 June 2021. As such, tenants are effectively authorised to pay what rent they can afford without the threat of legal consequences until these protections are removed.

The key legislation

  • The Coronavirus Act 2020 prevents lease forfeiture
  • The Corporate Insolvency and Governance Act 2020 prevents landlords from issuing statutory demands or winding up petitions

Exceptions to the legislation

There is an exception to the Corporate Insolvency and Government Act if it can be shown that the debtor’s financial position was not negatively affected by the outbreak or that they would have been unable to pay their debts even if the pandemic had not worsened their financial position. However, these circumstances are difficult to prove, so the moratorium is likely to protect tenants in most cases.

Rent arrears

Tenants remain liable for any rent arrears accumulated during the period of restrictions on debt recovery. Nonetheless, landlords should be aware that businesses will take time to recover after protections are removed, and they may need to exercise patience rather than attempt aggressive debt recovery. If a tenant becomes insolvent, it will be far less likely that arrears can be recovered.

Is a tenant able to withhold rent or terminate their lease?

Whether a tenant can refuse to pay rent or choose to terminate the lease early will depend on the lease. It may contain a break clause, force majeure clause, or provisions on turnover rent that allow it to do so. Nevertheless, most commercial leases ensure rent is payable without deduction or set off, and it is generally unlikely that a tenant will be able to withhold payment for COVID-related reasons.

The doctrine of frustration

Frustration of a contract occurs when a serious, unexpected event that is beyond the control of the parties makes it impossible for them to perform their contractual obligations. A tenant could potentially argue that their lease has been frustrated, however, there would be considerable scope for a landlord to challenge their claim.

Advice on how to move forward

In most cases, it will be in both the landlord and tenant’s interests that the tenant’s business survives the COVID-19 outbreak. Therefore, parties should negotiate solutions that see them work together to withstand the coming months, for instance, via a temporary rent reduction and structured repayment plan. With this in mind, the government has issued a voluntary Code of Practice for Commercial Property Relationships, which aims to guide negotiations between landlords and tenants.

To discuss this, or any other Commercial Property related matter, contact Tamzin Mandelli on 01483 887766, email or start a live chat today.

*This is not legal advice; it is intended to provide information of general interest about current legal issues.


Tamzin Mandelli

Partner, Commercial Property

Prior to joining Hart Brown, Tamzin had worked for a local authority and for both regional and national firms. Tamzin is a Partner with over...

Partner, Commercial Property

Tamzin Mandelli

Prior to joining Hart Brown, Tamzin had worked for a local authority and for both regional and national firms.

Tamzin is a Partner with over 23 years' experience and she is based at our Woking office. Tamzin specialises in all aspects of commercial property including the sale and purchase of shops, offices and restaurants, landlord and tenant matters (from granting the new lease, through to the various licences for works, transfers and so on) and dealing with the eventual termination of a lease. She is also experienced at dealing with development work including option agreements and acquisitions.

Hart Brown is recognised in the Legal 500 2024 edition for real estate work in the South East and the entry states “With substantial experience in sales and purchases of properties, landlord and tenant matters and development agreements, Tamzin Mandelli 'provides a high level of service’ and ‘is able to deliver what is needed’.”

What do Tamzin's clients say about her?

"We have just worked on a commercial transaction together, which was by far the most challenging case I have dealt with (for a variety of reasons). Tamzin was extremely efficient and salvaged the transaction multiple times... I highly recommend her!"

“Thank you very much for all of your help and support. It has been an absolute pleasure working with you and hope to do so again in the future!”

"...thank you for your support with X, it's been good fun. Wish you were handling a commercial purchase for me! … lesson learnt, will place with you next time!"

“The service I received was efficient, professional and the members I dealt with both past and present have been helpful…and very personable.”